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The difference between cryptocurrency and fiat money

The next few texts will be quite simplified in order for many people to understand them, so we beg more advanced users to take this into account. The cryptocurrency is digital money, or money in digital form. Money was in the form of coins, and then in the form of paper, and it was high time to appear in electronic form.

Some form of money exists in electronic form and it is in closed and isolated banking systems. We use today’s electronic money through payment cards.

So, it is located on computers and on bank networks, which again means that it is not free to circulate from the user to the user or from the user to the seller.

Coins and paper money is managed by us personally, and an electronic record in a bank computer is managed by a bank. This is the basic problem of the current attempts to digitize money.

No matter how the payment cards are trying to be modern and advanced, they do not have the basic function that paper banknotes and coins that are used for centuries have.

The current electronic money can’t be sent directly from the user to the user. This electronic money can also be blocked by a bank, a state or a hacker.

The only real digital money is cryptocurrency, bitcoin, ethereum, and others. Why? Because they behave identically like coins or paper money.

You can take it with you, you can keep it in the bank (exchange offices). When it is with you, it is under your complete control. You can send it to anyone you want and nobody can take it and destroy it if you behave according to simple rules .

Bitcoin is primarily imagined as digital money, which was created in 2009. Why it has not experienced massive use so far is that no one has control over it, neither an individual nor the state. What then is really Bitcoin? Bitcoin is a software, a database that independently lives on the Internet among its users.

The only data in that database is electronic money or Bitcoin. This database is called a blockchain.

When you own a Bitcoin, this means that you have a record in a database called a blockchain. When you want to access this database, you must have a password (similar as in some other cases) and this password is called a private key. This record (your Bitcoin) is under a specific number and this number is called a public key or an address. When you want to buy or sell a Bitcoin, you are actually buying or selling a record in a database called blockchain, and the record is a Bitcoin.

So blockchain is a closed system within which Bitcoins move from one to another address using private keys or password, where everyone manages their Bitcoins.